Cleo Nanni, Novus Capital
Bendigo and Adelaide Bank (BEN)
Expect positive earnings upgrades for all banks. Although Bendigo and Adelaide Bank has enjoyed a substantial share price rise from its March lows, it’s still under performed the majors. Look for a solid rally over the next few months and buy on dips.
Fission Energy (FIS)
In previous buy recommendations, published in thebull.com.au, we had success identifying some interesting small cap energy companies – Red Fork Energy and Deep Yellow. Another in this basket is Fission Energy. Funds from a recent capital raising will be allocated to ongoing nickel sulphide exploration at the Mt Thirsty joint venture, and to the JORC indicated resource for further test work on the cobalt-nickel-manganese oxide deposit. This is a speculative buy.
Western Areas (WSA)
Western Areas has achieved record nickel sales during the September quarter and expects to meet its annual production goal. Mining at the company’s Spotted Quoll open pit project is set to begin, and this should considerably lift output from this year’s expected 10,000 tonnes. My short-term recommendation is a hold, but buy on price dips.
AGL Energy (AGK)
AGL Energy controls Australia's biggest natural gas, electricity and dual fuel customer base, supplying more than 3.2 million customers. It also owns and operates the largest renewable generation portfolio, with a focus on hydro and wind power. It recently sold a wind farm it’s building in South Australia to a Japanese-led consortium, realising a fee of $88 million. AGL will continue to operate and maintain the 132.3 megawatt Hallett 4 wind farm, and retain rights to all renewable energy certificates and electricity output until 2036. The sale relieves it from ongoing development costs.
In August, this construction equipment company advised that it had received an unsolicited, indicative, non-binding proposal from an investment company to acquire 100 per cent of its stock. Discussions didn’t result in a credible offer and it was withdrawn in September. Given a takeover is unlikely, the share price premium should be removed from long-term price targets.
Babcock and Brown Power (BBP)
Revenue for the 2009 was $1.534 billion, an increase of only 0.4 per cent on the previous corresponding period. The full-year 2009 EBITDA was largely in line with the company’s August guidance. However, this result was marginally weaker than we expected, noting a number of one-off events that provided a difference between statutory and underlying earnings. There are significantly safer places to invest.
George Tsarouhas, Alpha Equities & Futures
AGL Energy (AGK)
This defensive stock is trading at the bottom of its range in a market that’s up 25 per cent in the past two and half months. Recent desalination contracts in Victoria and South Australia underpin the price, as does the potential sale of any government energy assets. AGL Energy’s strong balance sheet puts them in pole position to acquire accretive assets.
Dexus Property Group (DXS)
Dexus Property Group is a diversified listed property trust that owns a portfolio of office, industrial, car park and retail assets in Australia, the United States and Europe. The whole sector was battered during the global financial storm, but it’s slowly recovering. If one looks through the cycle, relative value shines. The company’s office portfolio is first class and, as conditions improve, its discount to net tangible assets will narrow. Buy.
Macquarie Group (MQG)
The recent run has left many baffled and wondering when Macquarie and the sharemarket will retreat - neither has happened, yet. While the stock is currently pricey, with forecast price/earnings of around 18 times, it’s a hold, as it has a history of positive surprises.
Westfield Group (WDC)
We remain bullish on this listed property trust, particularly over the long term. The share price has been volatile in the short term as investors react to the latest global economic outlook. The company has a long history of success, a reflection of quality management. The group operates 119 shopping centres around the world. Keep a close eye on this stock.
Harvey Norman (HVN)
The Government’s stimulus package is waning. Expect more interest rate rises to curb discretionary spending. After a solid price rally, and a consensus price/earnings ratio of about 16 times, the stock appears stretched. Take some profits and look to buy at a lower price.
BlueScope Steel (BSL)
Talk of China producing too much steel may put further downward pressure on prices. China may try to dump excess steel on the global market. The stock is highly leveraged to a recovery and vulnerable to disappointment if evidence shows a global re-stocking ending.
Grant Dwyer, Patersons Securities
Panoramic Resources (PAN)
At current prices, Panoramic is our preferred nickel stock with a price target of $3.06. In early morning trade on October 9, the share price was $2.56. At the Savannah project in the Pilbara, Panoramic should soon announce a mining reserve for the Savannah deeps area, while mining activity at the high-grade Deacon deposit continues to be ramped up.
The Salar De Olaroz project located in the Argentinean Andes contains a resource of 1.5 million tonnes of lithium carbonate and 4.4 million tonnes of potash. Demand for lithium-ion batteries used in electric vehicles is improving due to an international strategy to mitigate global warming.
This large brick and tile manufacturer also generates significant earnings from its property and investment divisions. The share price has increased 40 per cent in the past four months as New Hope Corporation, in which Brickworks has a substantial stake, has rallied to an all time high, and sentiment towards building material stocks has improved.
Energy Resources of Australia (ERA)
ERA has been a strong market performer and delivered a record 2009 half-year result. We have long been a supporter of ERA’s defensive appeal, but the qq21company is vulnerable to a strong Australian dollar and a stagnant uranium price outlook.
Western Areas (WSL)
Despite having a high-grade ore body (5.2 per cent nickel), Western Areas struggles to convert what should be high margin tonnes into bigger profits. Western Areas is trading above our price target, and we expect mine developments to consume significant cash in the next 12 months.
A strong Australian dollar will reduce the company’s income from offshore operations. Local operations suffer from imports, and returns are low due to a lack of pricing power. Despite recent capital raisings, interest cover remains below our comfort levels.
Please note that TheBull.com.au simply publishes broker recommendations on this page. The publication of these recommendations does not in any way constitute a recommendation on the part of TheBull.com.au. You should seek professional advice before making any investment decisions.
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